Align HR Metrics and Company Strategy

Your HR metrics say what’s important to HR, but is that what’s important to the C-Suite? HR professionals need to be keenly aware of the information they are providing to top management. Is it information that is useful in strategic decision making? If not, how can that be changed?

Metrics let people make decisions based on objective information rather than simply guessing or going by instinct. Metrics also let people know what is important to the organization, since a metric that is tracked will be analyzed.

HR metrics have historically often focused on the past. For example, HR metrics often include things like turnover or time to hire. These data are useful but look only at raw info depicting what has happened, as opposed to assessing the “why” behind the data. Assessing the “why” is what will allow business leaders to make decisions accordingly. This is where HR professionals have an opportunity to change what metrics are presented and really make a strategic impact for the organization.

Let’s take a look at some of the ways HR can take a more strategic view with the metrics they present.

Transforming HR Metrics: From Turnover to Strategic Hiring and Retention Data

Turnover metrics are one of the cornerstones of HR reporting. Turnover figures are, of course, important. But HR can take a more strategic view by moving beyond simple turnover data. For example, instead of looking at turnover rates for the organization as a whole, consider breaking turnover down into key roles and focusing on data for key roles. This move alone can make the data more useful to decision makers within the organization.

Another way to move beyond simple turnover data is to begin finding why people left and what programs make people stay. This moves the data from quantitative to qualitative. One way to do this is to give current employees surveys that ask about employee satisfaction. Let the employees rate programs and give information on what programs or benefits they value. This can allow you to make connections between the programs that affect retention. Likewise, find out why employees are leaving. Conduct exit interviews to discover what changes can be made to reduce turnover. Use these data in HR reporting.

Transforming HR Metrics: From Time to Hire to Time to Be Productive

Time to hire and cost per hire are common HR metrics, but taken alone, they are difficult to act on. To take a more strategic view, look at the time it takes for a new employee to become productive and start contributing to company profitability. Look at the satisfaction level with the hiring process and the caliber of new hires.

This change is both quantitative (focusing on time to be productive) and qualitative (hiring satisfaction and talent level of new hires). This change in focus lets management see whether current recruitment programs are bringing in the right employees.

Here are some examples of the metrics that can be used:

• Time to be productive (based on measures of employee skill level at set intervals);
• Percentage of new hires who stay beyond the probationary period (shows fit with the organization);
• Performance ratings of new hires after 6 months (or some other appropriate time frame for your business); and
• Manager satisfaction level with quality of new hires.

By moving to metrics that show the quality of new hires, the metrics can be aligned with business goals and can help the business make better hiring decisions.

Managing an HR Department of One was recently recognized as one of SHRMStore’s “Great 8” best-selling products. Find out what all the buzz is about.

Transforming HR Metrics: Include HR Metrics Related to Revenue and Profit Goals

Traditionally, HR metrics have focused on data related to turnover, absenteeism, and the like. The key to being more strategic is to tie the information to business goals. For example, a business may have a specific goal around annual profit levels or revenue levels. If the HR department can present employee data that tie into these company goals, the data will be more relevant and actionable. Here are some examples:

• Profit-oriented HR metrics:
  • Time to full productivity (Don’t forget trend data, too: Are you hiring more productive people now than in the past?).
  • Profit per dollar of wages or vice versa—wages spent per dollar of profit generated.
• Revenue-oriented HR metrics:
  • Revenue per employee.
  • ROI on new programs or on training employees.

Remember to show trends in the metrics so that you can see how the data change over time.

Transforming HR Metrics: Focus on Competitiveness

Another often-missed aspect in HR metrics is competitive information. A metric is more useful when there is a point of comparison or benchmark.

HR professionals have a lot of options when it comes to including competitive data in employee metrics. Here are a few examples:

• What salary level do you use compared to the market averages? Higher? Lower?
• How does your retention rate for key roles compare to the industry average or to your closest competition for talent?
• How does your productivity rate (or time to be productive) compare?
• What is your employee satisfaction rate? What is the industry average?

Moving to Metrics That Have Strategic Impact

To make this move to more strategic HR metrics, the first step is to clearly understand the organization’s goals and objectives. Then you will best be able to assess which HR metrics can be updated to help make strategic decisions.

Once the right metrics are chosen, be sure to get accurate data. The metric will be useless if it’s not accurate because it won’t be credible, and the message will be lost (even if the trend is accurate).

Next, find ways to effectively communicate the metrics to the people who can use it in decision making. If necessary, train people on how the data are presented so that everyone is on the same page.

Finally, be sure to review the metrics used on a regular basis. Talk to the stakeholders to ensure that they’re getting the information they need, and update the HR metrics as needed to reflect changing business realities and goals.

Picking the right metrics and getting management’s attention—just one of the many challenges HR managers face. From hiring to firing, HR’s never easy, and in a small department, it’s just that much tougher.

BLR’s Managing an HR Department of One is unique in addressing the special pressures small HR departments face. Here are some of its features:

• Explanation of how HR supports organizational goals. This section explains how to probe for what your top management really wants and how to build credibility in your ability to deliver it.
• Overview of compliance responsibilities through a really useful, 2-page chart of 23 separate laws that HR needs to comply with. These range from the well-known Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and new healthcare reform legislation, to lesser-known but equally critical rules, such as Executive Order 11246. Also included are examples of federal and state posting requirements. (Proper postings are among the first things a visiting inspector looks for—especially now that the minimum wage has been repeatedly changing.)

Feel as if you’re all alone in HR? Take on a partner—Managing an HR Department of One. Get more information.

• Training guidelines. No matter the size of your company, expect to conduct training. Some of it is required by law; some of it just makes good business sense. Managing an HR Department of One walks you through how to train efficiently and effectively with a minimum of time and money.
• Prewritten forms, policies, and checklists. These are enormous work savers! Managing an HR Department of One has 46 such forms, from job applications and background check sheets to performance appraisals and leave requests, in both paper and PDF format.

If you’d like a more complete look at what Managing an HR Department of One covers, click the Table of Contents link below. Or, better yet, take a look at the entire program. We’ll send it to you for 30 days’ evaluation in your own office with no obligation to buy. Click here, and we’ll be happy to make the arrangements.